Q3 2008: Collapse in the Financial Markets

The financial system throughout the world is on the brink of disaster. A downturn in the US economy plus an unregulated derivative market related to housing has caused failures in financial markets globally. For many, a future recession is imminent. How did this occur? Business and individuals had a positive outlook on the US economy. A housing bubble emerged and mortgage credits were provided to people who could otherwise not afford the units they bought. This speculative housing bubble started a boom in the construction sector. The bubble finally burst. Banks were less liquid than before. A credit crunch halted the boom and contaminated the rest of the global financial system. The collapse has just started. Financial bailouts by governments have been approved but it is yet too early to determine if they will succeed. Against this background, where is the Puerto Rico economy headed?